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Delta Variant Concerns May Continue To Weigh On Wall Street

The major U.S. index futures are currently pointing to a modestly lower open on Thursday, with stocks likely to see further downside after ending the previous session in the red.

Continued concerns about the rapid spread of the delta variant of the coronavirus may weigh on Wall Street along with uncertainty about the outlook for monetary policy.

The futures pared their losses after the European Central Bank announced it would slow the pace of asset purchases under its pandemic emergency purchase program.

The Federal Reserve could also reveal plans to begin scaling back its asset purchases following a meeting later this month.

The asset purchase program has helped support stocks throughout much of the Covid-19 pandemic, leading to some worries about the impact of tapering.

On the U.S. economic front, the Labor Department released a report showing a bigger than expected decrease in first-time claims for U.S. unemployment benefits in the week ended September 4th.

Stocks moved mostly lower during trading on Wednesday following the mixed performance seen on Tuesday. With the drop on the day, the tech-heavy Nasdaq pulled back off Tuesday's record closing high.

The major averages all finished the day in negative territory. The Dow dipped 68.93 points or 0.2 percent to 35,031.07, the Nasdaq slid 87.69 points or 0.6 percent to 15,286.64 and the S&P 500 edged down 5.96 points or 0.1 percent to 4,514.07.

The weakness on Wall Street partly reflected concerns the rapid spread of the delta variant of the coronavirus may slow the global economic recovery.

Worries about the Federal Reserve scaling back its asset purchases also contributed to the selling pressure on the day.

The lower close by stocks also came after the Federal Reserve's Beige Book said U.S. economic growth downshifted slightly to a moderate pace in early July through August.

The Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, said the deceleration in economic activity was largely attributable to a pullback in dining out, travel, and tourism in most districts.

The deceleration in those sectors reflected safety concerns due to the rise of the Delta variant of the coronavirus, and, in a few cases, international travel restrictions.

Meanwhile, the Fed said other sectors of the economy where growth slowed or activity declined were those constrained by supply disruptions and labor shortages, as opposed to softening demand.

"In particular, weakness in auto sales was widely ascribed to low inventories amidst the ongoing microchip shortage, and restrained home sales activity was attributed to low supply," the Fed said.

The Beige Book also said inflation was reported to be steady at an elevated pace, as half of the districts characterized the pace of price increases as strong, while half described it as moderate.

Oil service stocks showed a substantial move to the downside on the day, resulting in a 3.4 percent slump by the Philadelphia Oil Service Index. The weakness among oil service stocks came despite a notable increase by the price of crude oil.

Considerable weakness was also visible among airline stocks, with the NYSE Arca Airline Index falling by 2.7 percent.

Steel, housing and computer hardware stocks also saw significant weakness, while utility stocks were among the few groups to buck the downtrend.

Commodity, Currency Markets

Crude oil futures are slipping $0.24 to $69.06 a barrel after jumping $0.95 to $69.30 a barrel on Wednesday. Meanwhile, after falling $5 to $1,793.50 an ounce in the previous session, gold futures are inching up $1.30 to $1,794.80 an ounce.

On the currency front, the U.S. dollar is trading at 109.87 yen versus the 110.25 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1815 compared to yesterday's $1.1816.

Asia

Asian stocks fell broadly Thursday on growth worries as the Federal Reserve's Beige Book showed a "downshift" in the U.S. economy last month and the Japanese government said it plans to extend Covid-19 emergency restrictions in Tokyo and other regions.

Chinese shares advanced after data showed consumer prices in the country rose 0.8 percent year-on-year in August, shy of expectations for an increase of 1.0 percent, which would have been unchanged from the previous month.

On a monthly basis, inflation rose just 0.1 percent - again short of forecasts for an increase of 0.5 percent and slowing from 0.3 percent in July.

Another report showed that producer prices jumped an annual 9.5 percent, exceeding expectations for an increase of 9.0 percent, which would have been unchanged from the month earlier.

The benchmark Shanghai Composite Index rose 17.94 points, or 0.5 percent, to 3,693.13. Hong Kong's Hang Seng Index plummeted 604.93 points, or 2.3 percent, to 25,716, with tech stocks taking another hit after Chinese authorities summoned top gaming firms for talks.

Japanese shares ended lower to snap an eight-day winning streak - the longest since early November - after the government said it would extend its COVID-19 state of emergency in Tokyo and 18 other prefectures until the end of this month.

The Nikkei 225 Index retreated from a nearly six-month high to end down 173.02 points, or 0.6 percent, at 30,008.19. The broader Topix closed 0.7 percent lower at 2,064.93 after reaching a three-decade closing high of 2,079.61 on Wednesday.

Heavyweight SoftBank Group gave up 1.9 percent on profit taking after surging the precious day on news of a $7 billion share-swap deal with Deutsche Telekom. Japan Airlines declined 1.6 percent on fund raising reports. Rival ANA Holdings lost 1.8 percent.

Australian markets tumbled amid mounting worries around growth and inflation. The benchmark S&P/ASX 200 Index fell 142.50 points, or 1.9 percent, to 7,369.50 as daily infections lingered near record levels in New South Wales. The broader All Ordinaries Index dropped 148.60 points, or 1.9 percent, to finish at 7,658.90.

Mining heavyweights BHP and Rio Tinto fell 1.7 percent and 2.5 percent, respectively, while gold miners Newcrest, Northern Star Resources and Evolution lost 1-2 percent.

Tech stocks fell broadly, with heavyweight Afterpay losing 3.1 percent. Epsilon Healthcare soared 10 percent after the cannabis producer inked a five-year partnership with Canadian biotech Valen.

Seoul stocks plunged amid virus concerns and uncertainties from the expiration of options and futures. The benchmark Kospi ended down 48.29 points, or 1.5 percent, at 3,114.70 as daily coronavirus cases remained in the 2,000s in the country for the second straight day despite tighter curbs on public life.

Health authorities warned new infections may further increase ahead of the Chuseok holiday, which runs from Sept. 18-22 this year.

Market bellwether Samsung Electronics declined 1.3 percent, No. 2 chipmaker SK Hynix fell 2.8 percent and internet portal operator Naver lost 2.6 percent.

Kakao shares slumped 7.2 percent in the wake of the ruling Democratic Party lawmakers' criticism over the market dominance of giant platform businesses.

Europe

European stocks are turning in a lackluster performance on Thursday, with growth worries and concerns surrounding the regulatory crackdown in China keeping underlying sentiment cautious.

Traders are also digesting the European Central Bank's monetary policy decision, with the bank leaving interest rates unchanged but announcing plans to slow the pace of asset purchases under its pandemic emergency purchase program.

While the French CAC 40 Index has edged up by 0.2 percent, the German DAX Index is down by 0.1 percent and the U.K.'s FTSE 100 Index is down by 1.2 percent.

Swiss drug major Roche has moved to the downside. The company has signed a definitive share purchase agreement to acquire long-term partner TIB Molbiol Group.

easyJet has also moved sharply lower after the airline announced a fully underwritten rights issue to raise gross proceeds of approximately 1.2 billion pounds..

AstraZeneca shares have also fallen. The European Medicines Agency has listed the neurological disorder Guillain-Barre syndrome, which can cause temporary paralysis, as a "very rare" side effect of the company's COVID-19 vaccine.

Sanofi has also declined. The French pharmaceutical company reported that its phase 3 PEGASUS trial evaluating rilzabrutinib to treat pemphigus, a rare autoimmune skin condition, did not meet its primary or key secondary endpoints.

On the other hand, Assa Abloy shares have jumped after U.S. lock maker Spectrum Brands Holdings Inc. agreed to sell its hardware and home improvement division to the Swedish rival for $4.3 billion in cash.

Merck KGaA shares have also risen. The German chemicals company expects Group sales to grow organically by more than 6 percent annually on average up to 2025.

U.S. Economic Reports

After last Friday's disappointing monthly jobs report, the Labor Department released a report on Thursday showing a bigger than expected decrease in first-time claims for U.S. unemployment benefits in the week ended September 4th.

The report said initial jobless claims fell to 310,000, a decrease of 35,000 from the previous week's revised level of 345,000. Economists had expected jobless claims to edge down to 335,000 from the 340,000 originally reported for the previous week.

With the bigger than expected decrease, jobless claims once again dropped to their lowest level since hitting 256,000 in the week ended March 14, 2020.

At 11 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended September 3rd.

Crude oil inventories are expected to slump by 4.6 million barrels after tumbling by 7.2 million barrels in the previous week.

Chicago Federal Reserve President Charles Evans is due to give welcome remarks before a virtual "Exploring Career Pathways in Economic and Related Fields" event at 11:05 am ET.

Also at 11:05 am ET, San Francisco Federal Reserve President Mary Daly is scheduled to present a paper in a "The Economic Gains From Equity" discussion before the virtual Brookings Institution Papers on Economic Activity Fall 2021 Conference.

Dallas Federal Reserve President Robert Kaplan is due to participate in a virtual moderated question-and-answer session "Next Phase: The Economic Outlook" hosted by Prairie View A&M University College of Business at 12 pm ET.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month's auction of $24 billion worth of thirty-year bonds.

Federal Reserve Governor Michelle Bowman is also due to speak on "Community Bank Access to Innovation" before a virtual American Bankers Association Fall Government Relations Council Meeting at 1 pm ET.

At 2 pm ET, New York Federal Reserve President John Williams is scheduled to give opening remarks before a virtual "Racism and the Economy: Focus on Health" event.

Boston Federal Reserve President Eric Rosengren is due to give closing remarks before the virtual "Racism and the Economy: Focus on Health" event at 4:25 pm ET.

Stocks In Focus

Shares of GameStop (GME) are moving sharply lower in pre-market trading after the video game retailer reported a wider than expected fiscal second quarter loss.

Sam Adams brewer Boston Beer (SAM) is also likely to come under pressure after withdrawing its 2021 financial guidance amid uncertainty about hard seltzer demand trends.

On the other hand, shares of Lululemon (LULU) are likely to see initial strength after the apparel maker reported better than expected fiscal second quarter results and raised its full-year guidance.

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